Norway's New Energy Frontier a Boon for Statoil (NYSE:STO)

By
InvestingDaily.comSep 20, 2012 10:15 am

Hammerfest, Norway, claims to be the northernmost city in the world. Although you might quibble that an area with a population of only 10,000 isn't much of a city, a booming energy industry could swell the population in coming years.

One of the top 10 gas producers in the world, Norway has supplied much of Europe's energy needs since the development of the Troll, Oseburg, Ekofisk, and other North Sea oil fields in the 1970s and 1980s.

But output from these giants has diminished over time. Norway's average monthly oil output peaked at about 3.4 million barrels per day in 2011 and has declined steadily over the past decade to 1.6 million barrels per day in May 2012. Meanwhile, the nation's production of natural gas has tumbled roughly 5% from its 2010 zenith of 10.3 billion cubic feet per day.

Source: Bloomberg

However, a series of major oil and gas field discoveries in the Barents Sea offshore Hammerfest could halt or even reverse the decline in Norway's oil and gas production. The Norwegian Petroleum Directorate (or NPD) estimates that Scandinavian nation's portion of the Barents Sea could contain 6 billion barrels of oil equivalent reserves.

The NPD's figure omits an area that had been the subject of a 40-year dispute with Russia, a disagreement that the two nations finally resolved in summer 2011. This deal could unlock billions of barrels of additional reserves for Norway and highlights the Arctic as one of the final frontiers for oil and gas exploration and production.

Norway's national oil company Statoil (NYSE:STO) and a host of other producers have announced a number significant oil and gas discoveries in this remote region.

The first offshore development in the Norwegian Barents Sea, Snohvit,or Snow White, has the distinction of being the world's northernmost offshore gas field and export facility for liquefied natural gas (or LNG). Statoil owns a 36.79% stake in Snohvit, while Norway's wholly owned national oil company, Petoro, holds a 30% interest. Total (NYSE:TOT), GDF Suez (EPA:GSZ) and RWE (ETR:RWE) own the remaining equity stakes.